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Global Market Report - 18 August

Lex Hall  |  18 Aug 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are poised to rise after Wall Street again flirted with a record and the tech-heavy Nasdaq surged.

The Australian SPI 200 futures contract was up 31 points, or 0.51 per cent, to 6,052 points at 8.30am Sydney time on Monday, suggesting a positive start to trading.

The Nasdaq surged to a record high close on Monday, while the S&P 500 approached its own record level, with both indexes lifted by Nvidia and other technology stocks.

The Dow Jones Industrial Average fell 0.31 per cent to end at 27,844.91 points, while the S&P 500 gained 0.27 per cent to 3,381.99. The Nasdaq Composite climbed 1 per cent to 11,129.73, its fifth closing high this month. Seven of the 11 major S&P sectors rose, with technology providing the biggest support to the S&P 500 index.

Locally, BHP has posted a 4 per cent fall in full year net profit to $US7.96 billion ($11 billion).

Westpac has become the first major bank not to pay an interim dividend as it warned of a “highly uncertain” outlook, even as third-quarter earnings rose.

The S&P/ASX200 benchmark index fell by 49.8 points to 6,076.4 points on Monday. The All Ordinaries index closed down by 43.2 points, or 0.69 per cent, at 6,218.5.

Gold is up 2.0 per cent to $US1,984.08 an ounce; Brent oil is up 1.1 per cent to $US45.31 a barrel; iron ore is down 0.4 per cent to $US122.44 a tonne.

Meanwhile, the Australian dollar was buying 72.12 US cents at 8.30am, up from 71.80 US cents at Monday’s close.

Asia

China shares closed at their highest in more than a month on Monday after the central bank injected fresh funds into the country’s financial system, with securities firms rallying on hopes for a lift from capital market reforms.

At the close, the Shanghai Composite index was up 2.34 per cent at 3,438.80 and the blue-chip CSI300 index added 2.35 per cent. Both indexes notched their highest closes since 13 July.

The financial sector sub-index ended 3.58 per cent higher, propelled by securities firms, which gained 5.07 per cent.

Hong Kong shares marked their highest close in nearly four weeks on Monday, tracking a regional rise after China’s central bank provided more medium-term loans to the country’s financial system.

At the close of trade, the Hang Seng Index was up 178.92 points or 0.71 per cent at 25,505.82, its highest close since 21 July.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.24 per cent, while Japan’s Nikkei index closed down 0.83 per cent.

Europe

European shares closed higher as China-exposed miners jumped on fresh stimulus for the world’s second-largest economy, but concerns about a resurgence of coronavirus cases in the region kept gains in check.

Travel and leisure stocks fell 1.5 per cent, continuing to slide after Britain added France and other countries to its quarantine list last week.

Adding to the sector’s woes, Italy reimposed restrictions like shutting discos and clubs over the weekend and Germany declared nearly all of Spain, including the tourist island of Mallorca, a coronavirus risk region.

British Airways-owner IAG fell 5.3 per cent and InterContinental Hotels, which runs the Crowne Plaza brand, slipped 2.4 per cent as Britain saw a fresh surge in covid-19 cases.

EasyJet was down 4.6 per cent on news it would close three of its bases in Britain, while Ryanair said it would reduce its flight capacity by a further 20 per cent during September and October.

However, the pan-European STOXX 600 index ended 0.3 per cent higher, with miners jumping 1.7 per cent after fresh liquidity moves by the central bank in China, the world’s top metals consumer.

Chipmakers also rose, while luxury stocks such as LVMH, Burberry and Kering climbed between 0.4 per cent and 1.9 per cent after Jefferies analysts said in a note that the strength of their businesses in China could help them to gain market share.

Pernod Ricard gained 3.3 per cent after Barclays upgraded the French spirits maker to “overweight.”

Markets generally appeared to be in a holding pattern ahead of August business activity data later this week, which could shed light on the pace of an economic recovery, while the US Federal Reserve’s policy minutes are also due on Wednesday.

France’s Sanofi gained 1.2 per cent after it agreed to buy US company Principia Biopharma Inc for about US$3.7 billion. Healthcare stocks provided the biggest boost to the STOXX 600.

Real estate firms took a hit as Europe’s largest property firm Unibail-Rodamco-Westfield slid 4.9 per cent after a media report said it was considering rights issue. The company said no decision had been made.

North America

The benchmark S&P 500 reached just shy of its 19 February intraday record high after testing that level for much of last week, while the Dow Jones was weighed down by losses in financial and industrial stocks.

Nvidia Corp was among the top boosts to the S&P 500 and Nasdaq for the day, surging 6.7 per cent to a record high after two analysts raised their price targets ahead of the chipmaker’s quarterly results on Wednesday.

In June, the Nasdaq became the first of the major Wall Street indexes to recoup its coronavirus-induced losses as several of its largest constituents, including Amazon.com Inc and Netflix Inc, benefited from curbs on social activity.

Lowe’s Cos Inc and Home Depot Inc each rose more than 2 per cent ahead of their earnings later in the week. The two home improvement chains are expected to have received a bump to their quarterly sales from consumers looking to do minor repair work while spending more time at home.

The S&P 500 retailing index climbed 1.4 per cent, with heavyweights Walmart Inc and Target Corp also set to report results this week.

Rackspace Technology jumped over 10 per cent after Reuters reported Amazon is in early talks to invest in the cloud services provider.

As of Friday, 457 companies in the S&P 500 had posted results, of which 81.4 per cent came in above dramatically lowered expectations, according to Refinitiv data.

Minutes of the Federal Reserve’s latest meeting, due on Wednesday, are expected to provide more insight into the central bank’s view of an economic recovery, while housing starts data is also on tap.

Caution is expected to seep into markets ahead of the November US presidential vote, as the election season kicks into higher gear with the Democratic National Convention, which runs Monday through Thursday.

Principia Biopharma Inc surged 9.3 per cent to a record high after French healthcare firm Sanofi said it would buy the company for about US$3.7 billion.

is content editor for Morningstar Australia

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